It’s the season of charitable giving! Christmas events supporting great causes, the holiday message of generosity, and of course, Dec 31, the last day of the tax year. Albertan’s give more to charity than any province in Canada, so we thought we would give you a few tips to ensure you, and your charity of choice get the most out of your generosity.
MAKE YOUR DONATION CLAIMS COUNT
The first $200 in donation only gets you 25% back in saved taxes. In Alberta, all your donations above $200 get you 50% back in tax savings! This is the highest benefit of any province, besides Quebec. If you don’t have a lot of donations in a year, pool your tax receipts up for a few years and claim them all in one year, by the same taxpayer. You can carry tax receipts forward for 5 years. If you don’t have a tax receipt, don’t claim it, because they will request it.
DONATE PERSONALLY RATHER THAN THROUGH THE CORPORATION
Generally, it is more beneficial to donate personally. The tax advantage is arguably quite similar, but donating personally tends to be more straightforward. Showing higher income on your personal tax return builds your personal credit.
DONATE TO REGISTERED CHARITIES WHO GIVE YOU AN OFFICIAL TAX RECEIPT
You need an official tax receipt, with a receipt number, eligible amount of gift, Charitable Registration number and an authorized signature. Only organizations with charitable status can issue tax receipts, and there are very few outside Canada that qualify. The CRA has a registry of foreign charities that you get credit for in Canada, and there is currently only one organization on that list: the Woodrow Wilson International Center for Scholars.
Unsure if the organization is registered? Look them up on the CRA’s online registry of all Registered Charities.
CONSIDER DONATING PUBLIC COMPANY SHARES OR LIFE INSURANCE
If done right, donating public company shares can be more beneficial than cash. This is especially applicable if you have shares that have appreciated in value, and you could face significant capital gains tax. If you donate the shares, you are exempt from paying tax on the capital gains, and the charity can issue you a tax receipt for the fair market value of the shares. If you sold the shares and donated the cash, you would get the same tax receipt, but would have to pay tax on the capital gains. Life insurance is also great, but is a topic for another day.
DON’T EXPECT A TAX RECEIPT FOR DONATIONS OF SERVICES OR HOUSEHOLD ITEMS
You cannot donate services and get a tax receipt, however I have heard of people charging the charity at fair market rates for their services, and then donating cash back.
If you want a tax receipt for donating personal property, you are responsible for getting a qualified appraisal done. There are only certain types of property that would qualify for a tax receipt: land, houses/buildings, jewelry, vehicles, art and antiques. Special rules apply if you are an artist or a dealer.
DON’T FALL INTO A DONATION SCHEME TO GET A LARGER THAN DESERVING TAX RECEIPT
The general rule for donations is that you get a tax receipt for the fair market value of your gift. If you are pitched an opportunity to donate $500 and they will give you back a $5000 tax receipt – this is a scam, don’t do it. Do a google search and ask around about a charity to ensure they are legitimate, and scrupulous with your hard-earned cash.
DON’T DONATE THE FOLLOWING HOUSEHOLD ITEMS:
- Any damaged items
- Mattresses or sleeper sofas: risk of bed bugs is high
- Large appliances: charities don’t want large appliances, they often don’t work and are difficult to dispose of
- Any hazardous or dangerous materials like paint, car parts, or cleaning supplies
DONATE THESE HOUSEHOLD ITEMS INSTEAD:
You will not get a tax receipt, but charities can put these items to good use if they are clean and in good working condition:
- Non-perishable Food: Calgary Foodbank
- Entertainment: books, video games, records, cd’s, phones, dvd players
- Clothes & outerwear
- Sports equipment
We encourage everyone to be generous this holiday season!
If you have any other questions about your small business, we’d be more than happy to help you with stress-free and simple bookkeeping and accounting solutions. Visit www.truenorthaccounting.com for details.
Read more about Personal Tax topics that may be helpful to you and your small business.
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